Why Renting Cars Could Soon Be Easier Than Hailing a Taxi

Image: RelayRides

Imagine you’re walking down a city street and you realize you need a ride. Instead of waving your hand to hail a cab, or even pulling out Uber to digitally summon a taxi, you call up a map that shows which cars parked along the sidewalk you could drive away right now. A few taps on your phone, a lock clicks open and you’re on your way.

Instant, ubiquitous mobility is the future as imagined by RelayRides, the Airbnb of car rentals. The San Francisco-based company just announced its acquisition of Wheelz, its main startup competitor, in a deal that puts new corporate and technological weight behind this vision.

Last year, Zipcar led a nearly $14 million investment round in Wheelz. Its acquisition now makes Zipcar a RelayRides shareholder, says Andre Haddad, RelayRides’ CEO. Zipcar itself was bought a few months ago by Avis. The Wheelz deal puts traditional car rentals in the same sandbox as idealistic peer-to-peer car-sharing, which suggests the mainstream industry sees the RelayRides concept as more than just a utopian fantasy.

Haddad says the deal brings together RelayRides’ 50-state reach and software expertise with hardware developed by Wheelz to make renting out your car as painless as possible. Though RelayRides does have a partnership with General Motors’ OnStar to make unlocking a car without a key possible, many car owners who offer their cars for rent on RelayRides must still meet up with renters and hand them the keys, he says. Wheelz’ hardware, once installed, lets renters access cars by app.

Zipcar’s app offers a similar feature. Unlike Zipcar, however, which must bear the costs of managing its own fleet of cars, RelayRides’ service could theoretically scale to include any willing car owner. In a sense, RelayRides isn’t really in the rental car business at all—it’s just another platform connecting people who need something (a way to get from one place to another) with people who can meet that need.

“Our DNA is so much closer to an eBay or an Airbnb than a company that manages fleets,” says Steve Webb, RelayRides’ director of communications.

Haddad, a former CEO of Shopping.com, sees the traditional rental car industry versus RelayRides as analogous to brick-and-mortar retail versus eBay, where he also worked as senior vice-president of product. In both cases, the incumbents are burdened with massive physical inventories, while marketplaces simply facilitate connections.

At the same time, he says renters are using RelayRides more and more for more traditional car rentals. The company started out emphasizing hour-by-hour car rentals. Recently, however, more than a third of company revenue has come from renting vehicles by the week and the month. The average rental is two-and-a-half days. Meanwhile, one owner on the RelayRides network booked the biggest rental in the company’s history: a six-month rental for $4,000.

Unlike traditional car rental companies, however, which centralize their fleets around a few locations such as airports—or even a company like Zipcar, which clusters its vehicles around dense urban hubs—RelayRides has the potential to offer rental cars anywhere, anytime, if its users and technology click as promised. In RelayRides’ ideal version of its vision, 100 million Americans will be within 10 minutes’ walking distance of a rental car by 2015. If that really happens, renting a car stops being about the car or how you get it. Instead, cars themselves become a kind of platform—automobiles as a service, as tools for using rather than owning.

“The user benefits are the same,” Haddad says. “You serve the need for mobility. But the way that you do it is so radically different.”